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The Gillard health program: reform without change?

17 February 2011

Markets and demand are transforming the health system, but the policy debate isn’t catching up, writes James Gillespie

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Above: Julia Gillard, with Anna Bligh (left) and Kristina Keneally, at a press conference with the state and territory leaders after last Sunday’s COAG meeting in Parliament House, Canberra. AAP Image/Andrew Taylor

Above: Julia Gillard, with Anna Bligh (left) and Kristina Keneally, at a press conference with the state and territory leaders after last Sunday’s COAG meeting in Parliament House, Canberra. AAP Image/Andrew Taylor

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WHATEVER its shortcomings in concrete achievements, the current round of health reforms has set new records for hyperbole. Launching “the biggest health reform since Medicare” last year, Kevin Rudd declared that “the days of incremental reform are over.” Julia Gillard’s version, signed off by the assembled premiers and chief ministers at the Council of Australian Governments meeting on Sunday, was pared-down and more limited, but the rhetorical claims remained high: “We are sweeping away those eight separate bureaucracies for one national funding body,” the prime minister announced. And although the broad details were still a mystery, the leader of the opposition, Tony Abbott, denounced “an historic capitulation on what the government was proposing. This is the biggest surrender since Singapore.”

The reality is more prosaic. The latest deal is a recognition that federal arrangements are deeply embedded in the organisation of public health services, and an acknowledgement of the new balance of power emerging with Coalition governments in charge in Western Australia, Victoria and, almost certainly, New South Wales. The new COAG heads of agreement confirm the existing division of roles: the states and territories are assured of their position as “system managers for public hospital services” with a “lead role in public health,” while the Commonwealth, through Medicare, keeps a “lead role” in primary care – a set of divisions at the heart of many critiques of Australian health funding.

Most commentary has concentrated on the adjustments agreed by COAG. Abandoning the planned 60:40 per cent Commonwealth funding of hospitals – which would largely have been achieved by clawing back existing GST revenues from the states – the Commonwealth will now guarantee to meet 45 per cent, with a 50:50 split on new expenditures. Moves towards more transparent and efficient funding methods have been retained or even made more transparent, with a national funding body managing pooled state and federal funding. The significance of these changes will emerge more clearly as the details are negotiated over the next few months.

The changes focus on hospital reform – and it is important to remember that this made up only one part of Labor’s reform agenda. The Rudd government launched ambitious reviews of virtually every area of health policy. Reform was seen as system-wide, but the commissions were overlapping, often announced with little consultation or coordination. Although the ambition seemed to be to reform the whole system, there was never a sense of common architecture binding policy approaches together. The National Health and Hospital Reform Commission had the sweeping task of overseeing the health system as a whole, supplemented by overlapping taskforces in primary care, maternal health services and prevention. By early 2010, the government had received proposals for reform in virtually every area. Each of these bodies has continued to put forward policy reforms, adding up to a series of sweeping proposals that could profoundly change our healthcare. And many of these reforms are proceeding – with the most politically difficult, aged care, still with the Productivity Commission.

Incrementalism has its virtues. While Rudd compared his agenda with the radical funding reforms of Medibank and Medicare, the current context is quite different – and more challenging. The two previous great waves of national health reform in Australia – the movement of the Commonwealth into funding a public-private system built on subsidised private health insurance (1938–53) and the introduction and consolidation of Medicare (1972–84) – focused on improving access to medical care through financial reform. They were both radical – changes came through centralised shifts in funding responsibilities – and deeply conservative, with little desire to alter the content of health services.

However heated the battles with the medical profession, the conflict focused on forms of government or insurance-fund payment for services. The general pattern of hospital and primary (largely general practice) services received little criticism – the demand was for more of the same. Australia was not alone; the postwar wave of health reform in developed countries concentrated mainly on these questions of access and equity. Medicare (largely crafted in the 1960s) offered a solution to the health problems of the 1940s and 50s – acute illness, treated first by local GPs and then by lengthy stays in hospital, where either it was cured or the patient died. Broader attempts at service reform, such as Whitlam’s abortive community health centres, were marginal and abandoned in the face of medical opposition.

The Rudd/Gillard project has made gestures to the new problems of the health system. Many Australians still face barriers in gaining access to existing services – in remote areas and Indigenous communities and because of the growing burden of out-of-pocket costs – but policy challenges have shifted to more intractable questions of the content and coordination of health services. The growing burden of chronic illness – including mental illness – has exposed the limitations of a health care system built around the problems of earlier generations. The new pattern of illness involves long-term conditions, largely incurable, such as diabetes, many cancers, and respiratory and heart conditions. The general practitioners at the heart of Medicare, working with fee-for-service in splendid isolation from hospitals, are ill-equipped to coordinate patient care. Hospitals, still geared to short episodes of acute illness, have little ability to connect with patient care in the community.

There has been some recognition of these pressures in the reform drive. Rudd’s speeches were peppered with references to the need for coordination and the problems of an ageing society and chronic care. The new COAG heads of agreement propose that funds from efficiency savings should go towards chronic disease management and other programs designed to shift demand away from the hospital system. But the bulk of attention still addresses the headline issues of hospital waiting lists and elective surgery. System reforms, designed to force more localised “hospital networks” on the states, were more a reaction to the unpopularity of the centralised NSW and Queensland models than an attempt to think through why the more regionalised, but certainly not community controlled, Victorian models appeared more resilient in the face of tabloid assaults on real or “beat up” hospital crises.

Where do the new COAG agreements leave us? There are four, somewhat contradictory points:

Federalism has been reasserted. After a long decline during the Howard years, marked by successful cost- and blame-shifting via which cash-strapped state governments were made responsible for the faults of the system, the turn of the political cycle is opening some real political interchange. The states control and understand the public hospital system, and Tony Abbott’s disastrous attempt to assert direct control of Tasmania’s Mersey Hospital during the dying days of the Howard government served to underline the lack of local knowledge and administrative capacities at federal level. Rhetorical threats of federal “takeovers” were never serious. Increased Commonwealth funding can push the states towards some reforms, such as efficient pricing. Hospital reform will depend – as in the past – on state and territory governments, not on a magic wand of centralised single-payer Commonwealth funding

Is primary care more than enhanced general practice? Medicare Locals – the larger primary care organisations to be formed from mid 2011 – reflect the limits of a vision focused on expenditure flows from Canberra. Although hailed as the framework for a fundamental reshaping of primary care, much of the system is left out, with these new bodies looking more like revamped divisions of general practice, excluding many of the areas of primary practice most used by the general public: community pharmacy and healthcare services such as physiotherapy. The new COAG agreements offer the interesting suggestions that Medicare Locals will be funded to provide services and focus coordination. We still need to see hard money following these worthy declarations.

The reforms recognise but skirt the difficult task of building effective links to coordinate a fractured system. Funding reforms may facilitate this, but are only part of the solution to a problem built on archaic organisational structures and patterns of professional practice that will only change slowly and require careful local action rather than grand national gestures. The Medicare Locals have different boundaries from hospital networks and could perpetuate current divisions. The key problem for the next generation of health policy-makers is how to align new forms of demand for services with limited resources – a long way from the shrieking tabloid politics of hospital waiting lists.

The growth of the private sector remains outside policy. The long battle to win bipartisan support for Medicare ended in 1996 but still haunts public discourse. Some observers still treat the relatively small subsidies to private health insurance (admittedly poorly targeted and uncapped) as a problem well beyond their real significance. In the meantime, a large private sector – spanning innovative day surgeries, hospitals, community-based specialists and allied health providers with limited access to Medicare rebates – remains largely outside policy debate. Debates around primary care – even just at the general practice end – ignore the complexity of business models, ownership structures and incentives that have resulted from new corporate structures. The private sector still has no representatives at COAG.

The American political scientist Jacob Hacker has described recent government attempts to intervene in Western health systems as “reform without change and change without reform.” He argues that deep institutional rigidities mean that the policy levers available to governments have less purchase, while funding reforms focused on the public sector have diminishing influence on the emerging policy problems. At the same time, massive changes driven by markets and patterns of population demand are transforming the system, well outside any government’s control. If the COAG reforms are to cross these divides and begin to solve the new problems of healthcare, they need an agile leadership not yet seen in this (or any other) Australian government. •

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Former UN weapons inspector Hans Blix looks at the recent memoirs of Tony Blair, John Howard and George W. Bush. “Mr Howard seems to have felt sheer disdain for British squeamishness about the United Nations," he writes

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Above: John Howard addresses Royal Australian Air Force personnel during his visit to the Royal Australian Air Force C130 Hercules detachment in Qatar in June 2003.Photo: Department of Defence

Above: John Howard addresses Royal Australian Air Force personnel during his visit to the Royal Australian Air Force C130 Hercules detachment in Qatar in June 2003.Photo: Department of Defence